I was going back in forth with a bond expert in some emails.I told her that the high grade munis in a 10 year ladder are so bad that this 3 yr cd at 1.8 in an IRA was a much better option.She warned me that their has to be a catch in terms of being insured/guaranteed to have such a high yield.I have read some things on the web and a lot of people seem to hate PenFed because of their customer service and hassles.My main concern is are they worry free in terms of safety for our investments.Any PenFed bogleheads with some words of wisdom?

hoops777 wrote:I was going back in forth with a bond expert in some emails.I told her that the high grade munis in a 10 year ladder are so bad that this 3 yr cd at 1.8 in an IRA was a much better option.She warned me that their has to be a catch in terms of being insured/guaranteed to have such a high yield.I have read some things on the web and a lot of people seem to hate PenFed because of their customer service and hassles.My main concern is are they worry free in terms of safety for our investments.Any PenFed bogleheads with some words of wisdom?

I have some PenFed certificates. They are insured by the NCUA .... which is the agency that insures credit unions. The 1.8% rate is good in todays cd enviroment. Check the NCUA site for insurance coverage limits.http://www.ncua.gov/Pages/default.aspx

I've been a PenFed member for many years and have had a number of products through them - savings, CDs, mortgage, auto loans, credit cards, etc. Nothing but goodness from them. And recently the 6% PenFed CDs in our family have recently come to maturity. We are also thinking strongly about using the 3 year or 4 year CD and live with the 6-mo penalty if we want to take anything out. I have a thread out here http://www.bogleheads.org/forum/viewtopic.php?f=1&t=109885 about helping to set up my mom's portfolio who had previously not been into investing. She is also a very big PenFed fan. In fact, I recently asked the question of whether this CD would be more worthwhile than some bonds for part of her holdings.

BrandonBogle wrote:Specifically about VIPSX, I'm still reading up on how to "read" the numbers. The SEC Yield on that is currently negative. She asked me (and I told her I don't know) if any yield/appreciation of this holding would be a better return than the the 1.85% CD we have access to? The CD carries a 6-month interest penalty on it and we can get a multi-year term on it. I don't know enough to tell her NOT to go with the CD, but I think based on what I read so far that the TIPS are the better choice. With the CD, we are guaranteed not to keep up with inflation and isn't that exactly what TIPS are trying to accomplish?

Joining them and setup was fast and easy. Did everything online. I setup a savings account first and wired the money there first; then opened CDs online as soon as the money arrived. They did send me some CD papers in the mail after I already opened the CDs and I sent back the forms (not sure if that was absolutely necessary: CSR said no on the phone but when I asked via email they said I had to send back all the paperwork). I also had faxed them my signature card, but CD papers had to be sent my mail for some reason.

Anyway, I have no regrets so far and over many years I heard a lot of good things about them.

All the PenFed CDs have a six month penalty for early withdrawal except for the seven year CD which has a 12 month penalty.One of the things you can do to mitigate the penalty is to open multiple CDs at the time of purchase.So, if you plan on purchasing $100k worth of CDs, simply purchase 10 $10k CDs.

Should you need to terminate early, just turn in CDs for the minimum amount you need to cash out.If you decide to take a first class, six month trip around the world and need $30k, you need only cash in 3 $10k CDs; pay the six month ETP on those three CDs and preserve your interest on the remaining $70k.

Lastly I have had no trouble with PenFed CS.I have used then for CDs, autoloans, HEL and I'm considering refinancing my 10-year mortgage with a 5/5 ARM at 2.625%.

The only problems I have heard of is with their Mortgage department being swamped with applications and therefore taking longer than desired to complete the processing.I personaly have not experienced this.

crowd79 wrote:10 year CD at Discover for 2%. That is crazy long for such a small yield.....

10-year CDs are crap right now. I got a 3.25% from Discover in 2010, a 3.44% from iGoBanking in 2011, and a 2.5% from Discover in 2012. I was trying to slowly build a ladder of entirely 10-year CDs, but now it doesn't seem worth the trouble when the offerings are so poor.

The doubling effect yield of 3.53% interest on an EE Bond when held for exactly 20 years is more attractive at this point. Tax deferred and state income tax-free. However a massive, massive penalty if cashed in early at 0.2% interest. Most suitable for long term investments (retirement income) or breaking them in the first 1-3 years (small 3m penalty and much less lost on opportunity cost)..

Thanks SSSS & hoops777 for the info on Pentagon Federal Credit Union's excellent CD rates. If one is not a current member of the armed forces or a US government employee or a relative of one, here are some of the organizations you can join which will then allow you to join PenFed:

Local credit unions are another alternative. Often they let local community members join, even if the name of the credit union seems to indicate some exclusivity re. membership. Here's a partial list of credit unions across the country with over $500 million in assets: http://www.crnrstone.com/experience/cli ... illion.php .

Your money might actually be safer in a credit union than in a bank, though it's a fine point of distinction.

NCUA is an agency of the federal government, just as the FDIC is. NCUA insures your accounts at credit unions to the same limits as FDIC does for banks.

The difference is that credit unions capitalize their insurance fund, and carry this as an asset on their books. That means they have a vested interest in keeping the insurance fund solvent. If one credit union takes unwarranted risks, it affects them all.

Also, credit unions are more tightly regulated than banks. They simply are not allowed to invest in many of the riskier securities that banks are.

My money is in a credit union.Source(s):Worked for all types of financial institutions since 1977.